Reviewer Comm

8/20/2019 Reviewer Comm

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Corporation Code of the Philippines

1. What is a corporation

Section 2. Corporation defned. – A

corporation is an articial being

created by operation of law, having

the right of succession and the

powers, attributes and properties

expressly authoried by law orincident to its existence. !2"

2. Classifcations and

Distinctions

Section 2#. De acto corporations. –

$he due incorporation of any

corporation clai%ing in good faith to

be a corporation under this Code, and

its right to exercise corporate powers,

shall not be in&uired into collaterallyin any private suit to which such

corporation %ay be a party. Such

in&uiry %ay be %ade by the Solicitor

'eneral in a &uo warranto

proceeding. !n"

Section 2(. Corporation by

estoppel. – All persons who assu%e

to act as a corporation )nowing it to

be without authority to do so shall be

liable as general partners for alldebts, liabilities and da%ages

incurred or arising as a result

thereof* Provided, however, $hat

when any such ostensible corporation

is sued on any transaction entered by

it as a corporation or on any tort

co%%itted by it as such, it shall not

be allowed to use as a defense its lac)

of corporate personality.

+n who assu%es an obligation to an

ostensible corporation as such,

cannot resist perfor%ance thereof on

the ground that there was in fact no

corporation. !n"

Section . Classes o corporations.

– Corporations for%ed or organied

under this Code %ay be stoc) or non-

stoc) corporations. Corporations

which have capital stoc) divided into

shares and are authoried to

distribute to the holders of such

shares dividends or allot%ents of the

surplus prots on the basis of the

shares held are stoc) corporations

All other corporations are non-stoc)

corporations. !a"

Section /. Defnition. – 0or the

purposes of this Code, a non-stoc)

corporation is one where no part of

its inco%e is distributable as

dividends to its %e%bers, trustees, or

o1icers, subect to the provisions of

this Code on dissolution* Provided,

$hat any prot which a non-stoc)

corporation %ay obtain as an incidentto its operations shall, whenever

necessary or proper, be used for the

furtherance of the purpose or

purposes for which the corporation

was organied, subect to the

provisions of this $itle.

$he provisions governing stoc)

corporation, when pertinent, shall be

applicable to non-stoc) corporations,

except as %ay be covered by specicprovisions of this $itle. !n"

Section (2. Defnition and rights

o oreign corporations. – 0or the

purposes of this Code, a foreign

corporation is one for%ed, organied

or existing under any laws other than

those of the Philippines and whose

laws allow 0ilipino citiens and

corporations to do business in its own

country or state. 3t shall have the

right to transact business in the

Philippines after it shall have

obtained a license to transact

business in this country in accordance

with this Code and a certicate of

authority fro% the appropriate

govern%ent agency. !n"


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3. Components o a

Corporation

Section (#. Number and

qualifcations o incorporators. –

Any nu%ber of natural persons not

less than ve !4" but not %ore than

fteen !(4", all of legal age and a%aority of who% are residents of the

Philippines, %ay for% a private

corporation for any lawful purpose or

purposes. 5ach of the incorporators

of s stoc) corporation %ust own or be

a subscriber to at least one !(" share

of the capital stoc) of the corporation.

!6a"

Section 4. Corporators and

incorporators, stocholders and

members. – Corporators are those

who co%pose a corporation, whether

as stoc)holders or as %e%bers.

3ncorporators are those stoc)holders

or %e%bers %entioned in the articles

of incorporation as originally for%ing

and co%posing the corporation and

who are signatories thereof.

Corporators in a stoc) corporationare called stoc)holders or

shareholders. Corporators in a non-

stoc) corporation are called

%e%bers. !7a"

!. "ormation o a Corporation

Section (8. Commencement o

corporate e#istence. – A private

corporation for%ed or organied

under this Code co%%ences to havecorporate existence and uridical

personality and is dee%ed

incorporated fro% the date the

Securities and 5xchange Co%%ission

issues a certicate of incorporation

under its o1icial seal9 and thereupon

the incorporators,

stoc)holders:%e%bers and their

successors shall constitute a body

politic and corporate under the na%e

stated in the articles of incorporation

for the period of ti%e %entioned

therein, unless said period is

extended or the corporation is sooner

dissolved in accordance with law. !n"

Section (. $mount o capital stocto be subscribed and paid or the

purposes o incorporation. – At

least twenty-ve percent !24;" of the

authoried capital stoc) as stated in

the articles of incorporation %ust be

subscribed at the ti%e of

incorporation, and at least twenty-ve

!24;" per cent of the total

subscription %ust be paid upon

subscription, the balance to bepayable on a date or dates xed in the

contract of subscription without need

of call, or in the absence of a xed

date or dates, upon call for pay%ent

by the board of directors* Provided,

however, $hat in no case shall the

paid-up capital be less than ve

$housand !P4,###.##" pesos. !n"

Section (. Corporate name. –


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in any of the o1icial languages duly

signed and ac)nowledged by all of the

incorporators, containing

substantially the following %atters,

except as otherwise prescribed by

this Code or by special law*

(. $he na%e of the corporation9

2. $he specic purpose or purposes

for which the corporation is being

incorporated. =here a corporation

has %ore than one stated purpose,

the articles of incorporation shall

state which is the pri%ary purpose

and which is:are the secondary

purpose or purposes* Provided, $hat a

non-stoc) corporation %ay not

include a purpose which would

change or contradict its nature as

such9

. $he place where the principal

o1ice of the corporation is to be

located, which %ust be within the

Philippines9

7. $he ter% for which the corporation

is to exist9

4. $he na%es, nationalities and

residences of the incorporators9

6. $he nu%ber of directors or

trustees, which shall not be less than

ve !4" nor %ore than fteen !(4"9

/. $he na%es, nationalities and

residences of persons who shall act as

directors or trustees until the rst

regular directors or trustees are dulyelected and &ualied in accordance

with this Code9

. 3f it be a stoc) corporation, the

a%ount of its authoried capital stoc)

in lawful %oney of the Philippines,

the nu%ber of shares into which it is

divided, and in case the share are par

value shares, the par value of each,

the na%es, nationalities and

residences of the original subscribers,

and the a%ount subscribed and paid

by each on his subscription, and if

so%e or all of the shares are without

par value, such fact %ust be stated9

8. 3f it be a non-stoc) corporation, the

a%ount of its capital, the na%esnationalities and residences of the

contributors and the a%ount

contributed by each9 and

(#. Such other %atters as are not

inconsistent with law and which the

incorporators %ay dee% necessary

and convenient.

$he Securities and 5xchange

Co%%ission shall not accept thearticles of incorporation of any stoc)

corporation unless acco%panied by a

sworn state%ent of the $reasurer

elected by the subscribers showing

that at least twenty-ve !24;"

percent of the authoried capital

stoc) of the corporation has been

subscribed, and at least twenty-ve

!24;" of the total subscription has

been fully paid to hi% in actual cashand:or in property the fair valuation

of which is e&ual to at least twenty-

ve !24;" percent of the said

subscription, such paid-up capital

being not less than ve thousand

!P4,###.##" pesos.

Section (/. %rounds &hen articles

o incorporation or amendment

may be re'ected or disappro(ed. –

$he Securities and 5xchangeCo%%ission %ay reect the articles of

incorporation or disapprove any

a%end%ent thereto if the sa%e is not

in co%pliance with the re&uire%ents

of this Code* Provided, $hat the

Co%%ission shall give the

incorporators a reasonable ti%e

within which to correct or %odify the

obectionable portions of the articles


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or a%end%ent. $he following are

grounds for such reection or

disapproval*

(. $hat the articles of incorporation

or any a%end%ent thereto is not

substantially in accordance with the

for% prescribed herein9

2. $hat the purpose or purposes of

the corporation are patently

unconstitutional, illegal, i%%oral, or

contrary to govern%ent rules and

regulations9

. $hat the $reasurer>s A1idavit

concerning the a%ount of capital

stoc) subscribed and:or paid is false9

7. $hat the percentage of ownership

of the capital stoc) to be owned by

citiens of the Philippines has not

been co%plied with as re&uired by

existing laws or the Constitution.


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sub%itted to the Securities and

5xchange Co%%ission.

$he a%end%ents shall ta)e e1ect

upon their approval by the Securities

and 5xchange Co%%ission or fro%

the date of ling with the said

Co%%ission if not acted upon withinsix !6" %onths fro% the date of ling

for a cause not attributable to the

corporation.

*. +y-a&s

Section 76. $doption o byla&s. –

5very corporation for%ed under this

Code %ust, within one !(" %onth after

receipt of o1icial notice of the

issuance of its certicate of incorporation by the Securities and

5xchange Co%%ission, adopt a code

of by-laws for its govern%ent not

inconsistent with this Code. 0or the

adoption of by-laws by the

corporation the a1ir%ative vote of the

stoc)holders representing at least a

%aority of the outstanding capital

stoc), or of at least a %aority of the

%e%bers in case of non-stoc) corporations, shall be necessary. $he

by-laws shall be signed by the

stoc)holders or %e%bers voting for

the% and shall be )ept in the

principal o1ice of the corporation,

subect to the inspection of the

stoc)holders or %e%bers during

o1ice hours. A copy thereof, duly

certied to by a %aority of the

directors or trustees countersigned

by the secretary of the corporation,

shall be led with the Securities and

5xchange Co%%ission which shall be

attached to the original articles of

incorporation.


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whenever stoc)holders owning or

representing a %aority of the

outstanding capital stoc) or a

%aority of the %e%bers in non-stoc)

corporations, shall so vote at a

regular or special %eeting.

=henever any a%end%ent or new by-laws are adopted, such a%end%ent or

new by-laws shall be attached to the

original by-laws in the o1ice of the

corporation, and a copy thereof, duly

certied under oath by the corporate

secretary and a %aority of the

directors or trustees, shall be led

with the Securities and 5xchange

Co%%ission the sa%e to be attached

to the original articles of incorporation and original by-laws.

$he a%ended or new by-laws shall

only be e1ective upon the issuance by

the Securities and 5xchange

Co%%ission of a certication that the

sa%e are not inconsistent with this

Code. !22a and 2a"

. /o&ers o a Corporation

Section 6. Corporate po&ers andcapacity. – 5very corporation

incorporated under this Code has the

power and capacity*

(. $o sue and be sued in its corporate

na%e9

2. +f succession by its corporate

na%e for the period of ti%e stated in

the articles of incorporation and the

certicate of incorporation9

. $o adopt and use a corporate seal9

7. $o a%end its articles of

incorporation in accordance with the

provisions of this Code9

4. $o adopt by-laws, not contrary to

law, %orals, or public policy, and to

a%end or repeal the sa%e in

accordance with this Code9

6. 3n case of stoc) corporations, to

issue or sell stoc)s to subscribers and

to sell stoc)s to subscribers and to

sell treasury stoc)s in accordance

with the provisions of this Code9 andto ad%it %e%bers to the corporation

if it be a non-stoc) corporation9

/. $o purchase, receive, ta)e or grant,

hold, convey, sell, lease, pledge,

%ortgage and otherwise deal with

such real and personal property,

including securities and bonds of

other corporations, as the transaction

of the lawful business of the

corporation %ay reasonably and

necessarily re&uire, subect to the

li%itations prescribed by law and the

Constitution9

. $o enter into %erger or

consolidation with other corporations

as provided in this Code9

8. $o %a)e reasonable donations

including those for the public welfare

or for hospital, charitable, culturalscientic, civic, or si%ilar purposes

Provided, $hat no corporation,

do%estic or foreign, shall give

donations in aid of any political party

or candidate or for purposes of

partisan political activity9

(#. $o establish pension, retire%ent,

and other plans for the benet of its

directors, trustees, o1icers and

e%ployees9 and

((. $o exercise such other powers as

%ay be essential or necessary to

carry out its purpose or purposes as

stated in the articles of incorporation

!(a"

Section /. /o&er to e#tend or

shorten corporate term. – A private


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corporation %ay extend or shorten its

ter% as stated in the articles of

incorporation when approved by a

%aority vote of the board of directors

or trustees and ratied at a %eeting

by the stoc)holders representing at

least two-thirds !2:" of the

outstanding capital stoc) or by at

least two-thirds !2:" of the %e%bers

in case of non-stoc) corporations.

=ritten notice of the proposed action

and of the ti%e and place of the

%eeting shall be addressed to each

stoc)holder or %e%ber at his place of

residence as shown on the boo)s of

the corporation and deposited to the

addressee in the post o1ice with

postage prepaid, or servedpersonally* Provided, $hat in case of

extension of corporate ter%, any

dissenting stoc)holder %ay exercise

his appraisal right under the

conditions provided in this code. !n"

Section . /o&er to increase or

decrease capital stoc0 incur,

create or increase bonded

indebtedness. – s

%eeting duly called for the purpose,

two-thirds !2:" of the outstanding

capital stoc) shall favor the increase

or di%inution of the capital stoc), or

the incurring, creating or increasing

of any bonded indebtedness. =ritten

notice of the proposed increase or

di%inution of the capital stoc) or of

the incurring, creating, or increasing

of any bonded indebtedness and of

the ti%e and place of the

stoc)holder>s %eeting at which the

proposed increase or di%inution of

the capital stoc) or the incurring or

increasing of any bonded

indebtedness is to be considered,

%ust be addressed to each

stoc)holder at his place of residence

as shown on the boo)s of the

corporation and deposited to the


postage prepaid, or served personally.

A certicate in duplicate %ust be

signed by a %aority of the directors

of the corporation and countersigned

by the chair%an and the secretary of

the stoc)holders> %eeting, setting

forth*

!(" $hat the re&uire%ents of this

section have been co%plied with9

!2" $he a%ount of the increase or

di%inution of the capital stoc)9

!" 3f an increase of the capital stoc),

the a%ount of capital stoc) or nu%ber

of shares of no-par stoc) thereof

actually subscribed, the na%es

nationalities and residences of the

persons subscribing, the a%ount of

capital stoc) or nu%ber of no-par

stoc) subscribed by each, and thea%ount paid by each on his

subscription in cash or property, or

the a%ount of capital stoc) or nu%ber

of shares of no-par stoc) allotted to

each stoc)-holder if such increase is

for the purpose of %a)ing e1ective

stoc) dividend therefor authoried9

!7" Any bonded indebtedness to be

incurred, created or increased9

!4" $he actual indebtedness of the

corporation on the day of the

%eeting9

!6" $he a%ount of stoc) represented

at the %eeting9 and

!/" $he vote authoriing the increase

or di%inution of the capital stoc), or


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the incurring, creating or increasing

of any bonded indebtedness.

Any increase or decrease in the

capital stoc) or the incurring,

creating or increasing of any bonded

indebtedness shall re&uire prior

approval of the Securities and5xchange Co%%ission.

+ne of the duplicate certicates shall

be )ept on le in the o1ice of the

corporation and the other shall be

led with the Securities and

5xchange Co%%ission and attached

to the original articles of

incorporation. 0ro% and after

approval by the Securities and

5xchange Co%%ission and the

issuance by the Co%%ission of its

certicate of ling, the capital stoc)

shall stand increased or decreased

and the incurring, creating or

increasing of any bonded

indebtedness authoried, as the

certicate of ling %ay declare*

Provided, $hat the Securities and

5xchange Co%%ission shall not

accept for ling any certicate of increase of capital stoc) unless

acco%panied by the sworn state%ent

of the treasurer of the corporation

lawfully holding o1ice at the ti%e of

the ling of the certicate, showing

that at least twenty-ve !24;"

percent of such increased capital

stoc) has been subscribed and that at

least twenty-ve !24;" percent of the

a%ount subscribed has been paideither in actual cash to the

corporation or that there has been

transferred to the corporation

property the valuation of which is

e&ual to twenty-ve !24;" percent of

the subscription* Provided, further,

$hat no decrease of the capital stoc)

shall be approved by the Co%%ission

if its e1ect shall preudice the rights

of corporate creditors.


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such ter%s and conditions and for

such consideration, which %ay be

%oney, stoc)s, bonds or other

instru%ents for the pay%ent of %oney

or other property or consideration, as

its board of directors or trustees %ay

dee% expedient, when authoried by

the vote of the stoc)holders

representing at least two-thirds !2:"

of the outstanding capital stoc), or in

case of non-stoc) corporation, by the

vote of at least to two-thirds !2:" of

the %e%bers, in a stoc)holder>s or

%e%ber>s %eeting duly called for the

purpose. =ritten notice of the

proposed action and of the ti%e and

place of the %eeting shall be

addressed to each stoc)holder or%e%ber at his place of residence as

shown on the boo)s of the

corporation and deposited to the


postage prepaid, or served

personally* Provided, $hat any



conditions provided in this Code.

A sale or other disposition shall be

dee%ed to cover substantially all the

corporate property and assets if

thereby the corporation would be

rendered incapable of continuing the

business or acco%plishing the

purpose for which it was

incorporated.

After such authoriation or approval

by the stoc)holders or %e%bers, theboard of directors or trustees %ay,

nevertheless, in its discretion,

abandon such sale, lease, exchange,

%ortgage, pledge or other disposition

of property and assets, subect to the

rights of third parties under any

contract relating thereto, without

further action or approval by the

stoc)holders or %e%bers.


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Section 72. /o&er to in(est

corporate unds in another

corporation or business or or any

other purpose. – Subect to the

provisions of this Code, a private

corporation %ay invest its funds in

any other corporation or business or

for any purpose other than the

pri%ary purpose for which it was

organied when approved by a

%aority of the board of directors or

trustees and ratied by the

stoc)holders representing at least


capital stoc), or by at least two thirds

!2:" of the %e%bers in the case of

non-stoc) corporations, at a

stoc)holder>s or %e%ber>s %eeting

duly called for the purpose. =ritten

notice of the proposed invest%ent

and the ti%e and place of the %eeting

shall be addressed to each






personally* Provided, $hat anydissenting stoc)holder shall have

appraisal right as provided in this

Code* Provided, however, $hat where

the invest%ent by the corporation is

reasonably necessary to acco%plish

its pri%ary purpose as stated in the

articles of incorporation, the approval

of the stoc)holders or %e%bers shall

not be necessary. !(/ (:2a"

Section 7. /o&er to declare

di(idends. - $he board of directors of

a stoc) corporation %ay declare

dividends out of the unrestricted

retained earnings which shall be

payable in cash, in property, or in

stoc) to all stoc)holders on the basis

of outstanding stoc) held by the%*

Provided, $hat any cash dividends

due on delin&uent stoc) shall rst be

applied to the unpaid balance on the

subscription plus costs and expenses

while stoc) dividends shall be

withheld fro% the delin&uent

stoc)holder until his unpaid

subscription is fully paid* Provided

further, $hat no stoc) dividend shall

be issued without the approval of

stoc)holders representing not less

than two-thirds !2:" of the

outstanding capital stoc) at a regular

or special %eeting duly called for the

purpose. !(6a"

Stoc) corporations are prohibited

fro% retaining surplus prots in

excess of one hundred !(##;"percent of their paid-in capital stoc),

except* !(" when ustied by denite

corporate expansion proects or

progra%s approved by the board of

directors9 or !2" when the corporation

is prohibited under any loan

agree%ent with any nancial

institution or creditor, whether local

or foreign, fro% declaring dividends

without its:his consent, and suchconsent has not yet been secured9 or

!" when it can be clearly shown that

such retention is necessary under

special circu%stances obtaining in

the corporation, such as when there

is need for special reserve for

probable contingencies. !n"

Section 77. /o&er to enter into

management contract. –


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corporation, at a %eeting duly called

for the purpose* Provided, $hat !("

where a stoc)holder or stoc)holders

representing the sa%e interest of

both the %anaging and the %anaged

corporations own or control %ore

than one-third !(:" of the total

outstanding capital stoc) entitled to

vote of the %anaging corporation9 or

!2" where a %aority of the %e%bers

of the board of directors of the

%anaging corporation also constitute

a %aority of the %e%bers of the

board of directors of the %anaged

corporation, then the %anage%ent

contract %ust be approved by the

stoc)holders of the %anaged

corporation owning at least two-thirds !2:" of the total outstanding

capital stoc) entitled to vote, or by at


in the case of a non-stoc) corporation.


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the exercise of the powers so

conferred. !n"

Section 2. he board o directors

or trustees. – ?nless otherwise

provided in this Code, the corporate

powers of all corporations for%ed

under this Code shall be exercised, allbusiness conducted and all property

of such corporations controlled and

held by the board of directors or

trustees to be elected fro% a%ong the

holders of stoc)s, or where there is

no stoc), fro% a%ong the %e%bers of

the corporation, who shall hold o1ice

for one !(" year until their successors

are elected and &ualied. !2a"

5very director %ust own at least one

!(" share of the capital stoc) of the

corporation of which he is a director,

which share shall stand in his na%e

on the boo)s of the corporation. Any

director who ceases to be the owner

of at least one !(" share of the capital

stoc) of the corporation of which he

is a director shall thereby cease to be

a director. $rustees of non-stoc)

corporations %ust be %e%bersthereof. A %aority of the directors or

trustees of all corporations organied

under this Code %ust be residents of

the Philippines.

Section 7. Disloyalty o a director.

– =here a director, by virtue of his

o1ice, ac&uires for hi%self a business

opportunity which should belong to

the corporation, thereby obtaining

prots to the preudice of such

corporation, he %ust account to the

latter for all such prots by refunding

the sa%e, unless his act has been

ratied by a vote of the stoc)holders

owning or representing at least two-

thirds !2:" of the outstanding capital

stoc). $his provision shall be

applicable, notwithstanding the fact

that the director ris)ed his own funds

in the venture. !n"

Section 4. 4#ecuti(e committee. –

$he by-laws of a corporation %ay

create an executive co%%ittee

co%posed of not less than three

%e%bers of the board, to beappointed by the board. Said

co%%ittee %ay act, by %aority vote

of all its %e%bers, on such specic

%atters within the co%petence of the

board, as %ay be delegated to it in

the by-laws or on a %aority vote of

the board, except with respect to* !("

approval of any action for which

shareholders> approval is also

re&uired9 !2" the ling of vacancies inthe board9 !" the a%end%ent or

repeal of by-laws or the adoption of

new by-laws9 !7" the a%end%ent or

repeal of any resolution of the board

which by its express ter%s is not so

a%endable or repealable9 and !4" a

distribution of cash dividends to the

shareholders.

5. Directors and 67icers

Section 2. he board o directors

or trustees. – ?nless otherwise

provided in this Code, the corporate

powers of all corporations for%ed

under this Code shall be exercised, all

business conducted and all property

of such corporations controlled and

held by the board of directors or

trustees to be elected fro% a%ong the

holders of stoc)s, or where there is

no stoc), fro% a%ong the %e%bers of

the corporation, who shall hold o1ice

for one !(" year until their successors

are elected and &ualied. !2a"

5very director %ust own at least one

!(" share of the capital stoc) of the

corporation of which he is a director,

which share shall stand in his na%e


13/48


on the boo)s of the corporation. Any

director who ceases to be the owner

of at least one !(" share of the capital

stoc) of the corporation of which he

is a director shall thereby cease to be

a director. $rustees of non-stoc)

corporations %ust be %e%bers

thereof. A %aority of the directors or

trustees of all corporations organied

under this Code %ust be residents of

the Philippines.

Section 2/. Disqualifcation o

directors, trustees or o7icers. –


14/48


the sa%e person, except that no one

shall act as president and secretary

or as president and treasurer at the

sa%e ti%e.

$he directors or trustees and o1icers

to be elected shall perfor% the duties

enoined on the% by law and the by-laws of the corporation. ?nless the

articles of incorporation or the by-

laws provide for a greater %aority, a

%aority of the nu%ber of directors or

trustees as xed in the articles of

incorporation shall constitute a

&uoru% for the transaction of

corporate business, and every

decision of at least a %aority of the

directors or trustees present at a%eeting at which there is a &uoru%

shall be valid as a corporate act,

except for the election of o1icers

which shall re&uire the vote of a

%aority of all the %e%bers of the

board.

irectors or trustees cannot attend or

vote by proxy at board %eetings.

!a"

Section 26. 8eport o election o

directors, trustees and o7icers. –

=ithin thirty !#" days after the

election of the directors, trustees and

o1icers of the corporation, the

secretary, or any other o1icer of the

corporation, shall sub%it to the

Securities and 5xchange Co%%ission,

the na%es, nationalities and

residences of the directors, trustees,

and o1icers elected. Should a

director, trustee or o1icer die, resign

or in any %anner cease to hold o1ice,

his heirs in case of his death, the

secretary, or any other o1icer of the

corporation, or the director, trustee

or o1icer hi%self, shall i%%ediately

report such fact to the Securities and

5xchange Co%%ission. !n"

Section 2. 8emo(al o directors or

trustees. – Any director or trustee of

a corporation %ay be re%oved fro%

o1ice by a vote of the stoc)holders

holding or representing at least two-


stoc), or if the corporation be a non-

stoc) corporation, by a vote of at


entitled to vote* Provided, $hat such

re%oval shall ta)e place either at a

regular %eeting of the corporation or

at a special %eeting called for the

purpose, and in either case, after

previous notice to stoc)holders or

%e%bers of the corporation of the

intention to propose such re%oval at

the %eeting. A special %eeting of thestoc)holders or %e%bers of a

corporation for the purpose of

re%oval of directors or trustees, or

any of the%, %ust be called by the

secretary on order of the president or

on the written de%and of the

stoc)holders representing or holding

at least a %aority of the outstanding

capital stoc), or, if it be a non-stoc)

corporation, on the written de%and ofa %aority of the %e%bers entitled to

vote. Should the secretary fail or

refuse to call the special %eeting

upon such de%and or fail or refuse to

give the notice, or if there is no

secretary, the call for the %eeting

%ay be addressed directly to the

stoc)holders or %e%bers by any

stoc)holder or %e%ber of the

corporation signing the de%and


15/48


of representation to which they %ay

be entitled under Section 27 of this

Code. !n"

Section 28. 9acancies in the o7ice

o director or trustee. – Any

vacancy occurring in the board of

directors or trustees other than byre%oval by the stoc)holders or

%e%bers or by expiration of ter%,

%ay be lled by the vote of at least a

%aority of the re%aining directors or

trustees, if still constituting a

&uoru%9 otherwise, said vacancies

%ust be lled by the stoc)holders in a

regular or special %eeting called for

that purpose. A director or trustee so

elected to ll a vacancy shall beelected only or the unexpired ter% of

his predecessor in o1ice.

Any directorship or trusteeship to be

lled by reason of an increase in the

nu%ber of directors or trustees shall

be lled only by an election at a

regular or at a special %eeting of

stoc)holders or %e%bers duly called

for the purpose, or in the sa%e

%eeting authoriing the increase of directors or trustees if so stated in

the notice of the %eeting. !n"

Section 7. Disloyalty o a director.

– =here a director, by virtue of his

o1ice, ac&uires for hi%self a business

opportunity which should belong to

the corporation, thereby obtaining

prots to the preudice of such

corporation, he %ust account to the

latter for all such prots by refunding

the sa%e, unless his act has been

ratied by a vote of the stoc)holders

owning or representing at least two-


stoc). $his provision shall be

applicable, notwithstanding the fact

that the director ris)ed his own funds

in the venture. !n"

Section . Contracts bet&een

corporations &ith interlocing

directors. – 5xcept in cases of fraud,

and provided the contract is fair and

reasonable under the circu%stances,

a contract between two or %ore

corporations having interloc)ing

directors shall not be invalidated on

that ground alone* Provided, $hat if

the interest of the interloc)ing

director in one corporation is

substantial and his interest in the

other corporation or corporations is

%erely no%inal, he shall be subect to

the provisions of the preceding

section insofar as the latter

corporation or corporations are

concerned.

Stoc)holdings exceeding twenty

!2#;" percent of the outstanding

capital stoc) shall be considered

substantial for purposes of

interloc)ing directors. !n"

Section (. -iability o directors,

trustees or o7icers. - irectors or

trustees who willfully and )nowingly

vote for or assent to patently unlawfulacts of the corporation or who are

guilty of gross negligence or bad faith

in directing the a1airs of the

corporation or ac&uire any personal

or pecuniary interest in conict with

their duty as such directors or

trustees shall be liable ointly and

severally for all da%ages resulting

therefro% su1ered by the

corporation, its stoc)holders or%e%bers and other persons.

=hen a director, trustee or o1icer

atte%pts to ac&uire or ac&uire, in

violation of his duty, any interest

adverse to the corporation in respect

of any %atter which has been reposed

in hi% in condence, as to which

e&uity i%poses a disability upon hi%


16/48


to deal in his own behalf, he shall be

liable as a trustee for the corporation

and %ust account for the prots

which otherwise would have accrued

to the corporation. !n"

Section 2. Dealings o directors,

trustees or o7icers &ith thecorporation. – A contract of the

corporation with one or %ore of its

directors or trustees or o1icers is

voidable, at the option of such

corporation, unless all the following

conditions are present*

(. $hat the presence of such director

or trustee in the board %eeting in

which the contract was approved was

not necessary to constitute a &uoru%

for such %eeting9

2. $hat the vote of such director or

trustee was not necessary for the

approval of the contract9

. $hat the contract is fair and

reasonable under the circu%stances9

and

7. $hat in case of an o1icer, thecontract has been previously

authoried by the board of directors.

=here any of the rst two conditions

set forth in the preceding paragraph

is absent, in the case of a contract

with a director or trustee, such

contract %ay be ratied by the vote of

the stoc)holders representing at least


capital stoc) or of at least two-thirds!2:" of the %e%bers in a %eeting

called for the purpose* Provided, $hat

full disclosure of the adverse interest

of the directors or trustees involved is

%ade at such %eeting* Provided,

however, $hat the contract is fair and

reasonable under the circu%stances.

!n"

Section 4#. 8egular and special

meetings o stocholders or

members. - Begular %eetings of

stoc)holders or %e%bers shall be

held annually on a date xed in the

by-laws, or if not so xed, on any date

in April of every year as deter%ined

by the board of directors or trustees*

Provided, $hat written notice of

regular %eetings shall be sent to all

stoc)holders or %e%bers of record at

least two !2" wee)s prior to the

%eeting, unless a di1erent period is

re&uired by the by-laws.

Special %eetings of stoc)holders or

%e%bers shall be held at any ti%e

dee%ed necessary or as provided inthe by-laws* Provided, however, $hat

at least one !(" wee) written notice

shall be sent to all stoc)holders or

%e%bers, unless otherwise provided

in the by-laws.


17/48


corporation shall be held %onthly,

unless the by-laws provide otherwise.

Special %eetings of the board of

directors or trustees %ay be held at

any ti%e upon the call of the

president or as provided in the by-

laws.

Deetings of directors or trustees of

corporations %ay be held anywhere in

or outside of the Philippines, unless

the by-laws provide otherwise. %eeting. 3n

no case shall the total yearly


18/48


co%pensation of directors, as such

directors, exceed ten !(#;" percent

of the net inco%e before inco%e tax

of the corporation during the

preceding year. !n"

:. tocholders and hares

Section 6#. ubscription contract. –

Any contract for the ac&uisition of

unissued stoc) in an existing

corporation or a corporation still to

be for%ed shall be dee%ed a

subscription within the %eaning of

this $itle, notwithstanding the fact

that the parties refer to it as a

purchase or so%e other contract. !n"

Section 6(. /reincorporationsubscription. – A subscription for

shares of stoc) of a corporation still

to be for%ed shall be irrevocable for

a period of at least six !6" %onths

fro% the date of subscription, unless

all of the other subscribers consent to

the revocation, or unless the

incorporation of said corporation fails

to %aterialie within said period or

within a longer period as %ay bestipulated in the contract of

subscription* Provided, $hat no pre-

incorporation subscription %ay be

revo)ed after the sub%ission of the

articles of incorporation to the

Securities and 5xchange Co%%ission.

!n"

Section 62. Consideration or

stocs. – Stoc)s shall not be issued

for a consideration less than the paror issued price thereof. Consideration

for the issuance of stoc) %ay be any

or a co%bination of any two or %ore

of the following*

(. Actual cash paid to the

corporation9

2. Property, tangible or intangible,

actually received by the corporation

and necessary or convenient for its

use and lawful purposes at a fair

valuation e&ual to the par or issued

value of the stoc) issued9

. Eabor perfor%ed for or services

actually rendered to the corporation9

7. Previously incurred indebtedness

of the corporation9

4. A%ounts transferred fro%

unrestricted retained earnings to

stated capital9 and

6. +utstanding shares exchanged for

stoc)s in the event of reclassication

or conversion.

=here the consideration is other thanactual cash, or consists of intangible

property such as patents of

copyrights, the valuation thereof shall

initially be deter%ined by the

incorporators or the board of

directors, subect to approval by the


Shares of stoc) shall not be issued in

exchange for pro%issory notes or

future service.

$he sa%e considerations provided for

in this section, insofar as they %ay be

applicable, %ay be used for the

issuance of bonds by the corporation.

$he issued price of no-par value

shares %ay be xed in the articles of

incorporation or by the board of

directors pursuant to authority

conferred upon it by the articles ofincorporation or the by-laws, or in the

absence thereof, by the stoc)holders

representing at least a %aority of the

outstanding capital stoc) at a %eeting

duly called for the purpose. !4 and

(6"

Section 6. Classifcation o shares.

– $he shares of stoc) of stoc)


19/48


corporations %ay be divided into

classes or series of shares, or both,

any of which classes or series of

shares %ay have such rights,

privileges or restrictions as %ay be

stated in the articles of incorporation*

Provided, $hat no share %ay be

deprived of voting rights except those

classied and issued as FpreferredF or

Fredee%ableF shares, unless

otherwise provided in this Code*

Provided, further, $hat there shall

always be a class or series of shares

which have co%plete voting rights.

Any or all of the shares or series of

shares %ay have a par value or have

no par value as %ay be provided for

in the articles of incorporation*Provided, however, $hat ban)s, trust

co%panies, insurance co%panies,

public utilities, and building and loan

associations shall not be per%itted to

issue no-par value shares of stoc).

Preferred shares of stoc) issued by

any corporation %ay be given

preference in the distribution of the

assets of the corporation in case of li&uidation and in the distribution of

dividends, or such other preferences

as %ay be stated in the articles of

incorporation which are not violative

of the provisions of this Code*

Provided, $hat preferred shares of

stoc) %ay be issued only with a

stated par value. $he board of

directors, where authoried in the

articles of incorporation, %ay x the

ter%s and conditions of preferred

shares of stoc) or any series thereof*

Provided, $hat such ter%s and

conditions shall be e1ective upon the

ling of a certicate thereof with the


Shares of capital stoc) issued without

par value shall be dee%ed fully paid

and non-assessable and the holder of

such shares shall not be liable to the

corporation or to its creditors in

respect thereto* Provided9 $hat

shares without par value %ay not be

issued for a consideration less than

the value of ve !P4.##" pesos per

share* Provided, further, $hat the

entire consideration received by the

corporation for its no-par value

shares shall be treated as capital and

shall not be available for distribution

as dividends.

A corporation %ay, further%ore,

classify its shares for the purpose of

insuring co%pliance with

constitutional or legal re&uire%ents.

5xcept as otherwise provided in the

articles of incorporation and stated in

the certicate of stoc), each share

shall be e&ual in all respects to every

other share.

=here the articles of incorporation

provide for non-voting shares in the

cases allowed by this Code, the

holders of such shares shall

nevertheless be entitled to vote onthe following %atters*

(. A%end%ent of the articles of

incorporation9

2. Adoption and a%end%ent of by-

laws9

. Sale, lease, exchange, %ortgage,

pledge or other disposition of all or

substantially all of the corporate

property9

7. 3ncurring, creating or increasing

bonded indebtedness9

4. 3ncrease or decrease of capita

stoc)9

6. Derger or consolidation of the

corporation with another corporation

or other corporations9


20/48


/. 3nvest%ent of corporate funds in

another corporation or business in

accordance with this Code9 and

. issolution of the corporation.

5xcept as provided in the

i%%ediately preceding paragraph,the vote necessary to approve a

particular corporate act as provided

in this Code shall be dee%ed to refer

only to stoc)s with voting rights. !4a"

Section 4. Corporators and

incorporators, stocholders and

members. – Corporators are those

who co%pose a corporation, whether

as stoc)holders or as %e%bers.

3ncorporators are those stoc)holdersor %e%bers %entioned in the articles

of incorporation as originally for%ing

and co%posing the corporation and

who are signatories thereof.

Corporators in a stoc) corporation

are called stoc)holders or

shareholders. Corporators in a non-

stoc) corporation are called

%e%bers. !7a"

Section . 8edeemable shares. –

Bedee%able shares %ay be issued by

the corporation when expressly so

provided in the articles of

incorporation. $hey %ay be

purchased or ta)en up by the

corporation upon the expiration of a

xed period, regardless of the

existence of unrestricted retained

earnings in the boo)s of thecorporation, and upon such other

ter%s and conditions as %ay be

stated in the articles of incorporation,

which ter%s and conditions %ust also

be stated in the certicate of stoc)

representing said shares. !n"

Section 8. reasury shares. –

$reasury shares are shares of stoc)

which have been issued and fully paid

for, but subse&uently reac&uired by

the issuing corporation by purchase,

rede%ption, donation or through

so%e other lawful %eans. Such

shares %ay again be disposed of for a

reasonable price xed by the board of

directors. !n"

Section /. "ounders; shares. –

0ounders> shares classied as such in

the articles of incorporation %ay be

given certain rights and privileges not

enoyed by the owners of other

stoc)s, provided that where the

exclusive right to vote and be voted

for in the election of directors is

granted, it %ust be for a li%ited

period not to exceed ve !4" yearssubect to the approval of the

Securities and 5xchange Co%%ission

$he ve-year period shall co%%ence

fro% the date of the aforesaid

approval by the Securities and

5xchange Co%%ission. !n"


21/48


Fredee%ableF shares, unless

otherwise provided in this Code*

Provided, further, $hat there shall

always be a class or series of shares

which have co%plete voting rights.

Any or all of the shares or series of

shares %ay have a par value or have

no par value as %ay be provided for

in the articles of incorporation*

Provided, however, $hat ban)s, trust

co%panies, insurance co%panies,

public utilities, and building and loan

associations shall not be per%itted to

issue no-par value shares of stoc).

Preferred shares of stoc) issued by

any corporation %ay be given

preference in the distribution of theassets of the corporation in case of

li&uidation and in the distribution of

dividends, or such other preferences

as %ay be stated in the articles of

incorporation which are not violative

of the provisions of this Code*

Provided, $hat preferred shares of

stoc) %ay be issued only with a


directors, where authoried in thearticles of incorporation, %ay x the









and non-assessable and the holder of such shares shall not be liable to the




issued for a consideration less than

the value of ve !P4.##" pesos per






as dividends.



insuring co%pliance with

constitutional or legal re&uire%ents.





other share.



cases allowed by this Code, the

holders of such shares shallnevertheless be entitled to vote on

the following %atters*


incorporation9


laws9



substantially all of the corporateproperty9




stoc)9



or other corporations9/. 3nvest%ent of corporate funds in





i%%ediately preceding paragraph

the vote necessary to approve a


22/48





Section 2. 8emo(al o directors or

trustees. – Any director or trustee of

a corporation %ay be re%oved fro%

o1ice by a vote of the stoc)holdersholding or representing at least two-


stoc), or if the corporation be a non-

stoc) corporation, by a vote of at


entitled to vote* Provided, $hat such

re%oval shall ta)e place either at a

regular %eeting of the corporation or

at a special %eeting called for the

purpose, and in either case, afterprevious notice to stoc)holders or

%e%bers of the corporation of the

intention to propose such re%oval at

the %eeting. A special %eeting of the

stoc)holders or %e%bers of a

corporation for the purpose of

re%oval of directors or trustees, or

any of the%, %ust be called by the

secretary on order of the president or

on the written de%and of thestoc)holders representing or holding

at least a %aority of the outstanding

capital stoc), or, if it be a non-stoc)

corporation, on the written de%and of

a %aority of the %e%bers entitled to

vote. Should the secretary fail or

refuse to call the special %eeting

upon such de%and or fail or refuse to

give the notice, or if there is no

secretary, the call for the %eeting

%ay be addressed directly to the

stoc)holders or %e%bers by any

stoc)holder or %e%ber of the

corporation signing the de%and.


23/48


adopted by the a1ir%ative vote of the

stoc)holders owning at least two-


stoc) or of at least two-thirds !2:" of

the %e%bers of a %eeting to be held

upon call of the directors or trustees

after publication of the notice of ti%e,

place and obect of the %eeting for

three !" consecutive wee)s in a

newspaper published in the place

where the principal o1ice of said

corporation is located9 and if no

newspaper is published in such place,

then in a newspaper of general

circulation in the Philippines, after

sending such notice to each

stoc)holder or %e%ber either by

registered %ail or by personaldelivery at least thirty !#" days prior

to said %eeting. A copy of the

resolution authoriing the dissolution

shall be certied by a %aority of the

board of directors or trustees and

countersigned by the secretary of the

corporation. $he Securities and

5xchange Co%%ission shall

thereupon issue the certicate of

dissolution. !62a"

Section ((8. 9oluntary dissolution

&here creditors are a7ected. –

=here the dissolution of a

corporation %ay preudice the rights

of any creditor, the petition for

dissolution shall be led with the


$he petition shall be signed by a

%aority of its board of directors or

trustees or other o1icers having the

%anage%ent of its a1airs, veried by

its president or secretary or one of its

directors or trustees, and shall set

forth all clai%s and de%ands against

it, and that its dissolution was

resolved upon by the a1ir%ative vote

of the stoc)holders representing at




at a %eeting of its stoc)holders or

%e%bers called for that purpose.

3f the petition is su1icient in for% and

substance, the Co%%ission shall, by

an order reciting the purpose of thepetition, x a date on or before which

obections thereto %ay be led by any

person, which date shall not be less

than thirty !#" days nor %ore than

sixty !6#" days after the entry of the

order. @efore such date, a copy of the

order shall be published at least once

a wee) for three !" consecutive

wee)s in a newspaper of genera

circulation published in the%unicipality or city where the

principal o1ice of the corporation is

situated, or if there be no such

newspaper, then in a newspaper of

general circulation in the Philippines,

and a si%ilar copy shall be posted for

three !" consecutive wee)s in three

!" public places in such %unicipality

or city.

?pon ve !4" day>s notice, given afterthe date on which the right to le

obections as xed in the order has

expired, the Co%%ission shall

proceed to hear the petition and try

any issue %ade by the obections

led9 and if no such obection is

su1icient, and the %aterial

allegations of the petition are true, it

shall render udg%ent dissolving the

corporation and directing suchdisposition of its assets as ustice

re&uires, and %ay appoint a receiver

to collect such assets and pay the

debts of the corporation. !Bule (#7,

BCa"

Section 6. Certifcate o stoc and

transer o shares. – $he capita

stoc) of stoc) corporations shall be


24/48


divided into shares for which

certicates signed by the president or

vice president, countersigned by the

secretary or assistant secretary, and

sealed with the seal of the

corporation shall be issued in

accordance with the by-laws. Shares

of stoc) so issued are personal

property and %ay be transferred by

delivery of the certicate or

certicates indorsed by the owner or

his attorney-in-fact or other person

legally authoried to %a)e the

transfer.


25/48


with the provisions of this Code, shall

be liable to such director, trustee,

stoc)holder or %e%ber for da%ages,

and in addition, shall be guilty of an

o1ense which shall be punishable

under Section (77 of this Code*

Provided, $hat if such refusal is %ade

pursuant to a resolution or order of

the board of directors or trustees, the

liability under this section for such

action shall be i%posed upon the

directors or trustees who voted for

such refusal* and Provided, further,

$hat it shall be a defense to any

action under this section that the

person de%anding to exa%ine and

copy excerpts fro% the corporation>s

records and %inutes has i%properlyused any infor%ation secured through

any prior exa%ination of the records

or %inutes of such corporation or of

any other corporation, or was not

acting in good faith or for a legiti%ate

purpose in %a)ing his de%and.

Stoc) corporations %ust also )eep a

boo) to be )nown as the Fstoc) and

transfer boo)F, in which %ust be )epta record of all stoc)s in the na%es of

the stoc)holders alphabetically

arranged9 the install%ents paid and

unpaid on all stoc) for which

subscription has been %ade, and the

date of pay%ent of any install%ent9 a

state%ent of every alienation, sale or

transfer of stoc) %ade, the date

thereof, and by and to who% %ade9

and such other entries as the by-laws

%ay prescribe. $he stoc) and transfer

boo) shall be )ept in the principal

o1ice of the corporation or in the

o1ice of its stoc) transfer agent and

shall be open for inspection by any

director or stoc)holder of the

corporation at reasonable hours on

business days.


26/48


or any responsible o1icer of the

corporation. !n"

Section 6/. /ayment o balance o

subscription. – Subect to the

provisions of the contract of

subscription, the board of directors of

any stoc) corporation %ay at any ti%edeclare due and payable to the

corporation unpaid subscriptions to

the capital stoc) and %ay collect the

sa%e or such percentage thereof, in

either case with accrued interest, if

any, as it %ay dee% necessary.

Pay%ent of any unpaid subscription

or any percentage thereof, together

with the interest accrued, if any, shall

be %ade on the date specied in the

contract of subscription or on the

date stated in the call %ade by the

board. 0ailure to pay on such date

shall render the entire balance due

and payable and shall %a)e the

stoc)holder liable for interest at the

legal rate on such balance, unless a

di1erent rate of interest is provided

in the by-laws, co%puted fro% such

date until full pay%ent. 3f withinthirty !#" days fro% the said date no

pay%ent is %ade, all stoc)s covered

by said subscription shall thereupon

beco%e delin&uent and shall be

subect to sale as hereinafter

provided, unless the board of

directors orders otherwise. !"

Section 6. Delinquency sale. – $he

board of directors %ay, by resolution,

order the sale of delin&uent stoc) and

shall specically state the a%ount due

on each subscription plus all accrued

interest, and the date, ti%e and place

of the sale which shall not be less

than thirty !#" days nor %ore than

sixty !6#" days fro% the date the

stoc)s beco%e delin&uent.


27/48


shall be credited as paid in full in the

boo)s of the corporation. $itle to all

the shares of stoc) covered by the

subscription shall be vested in the

corporation as treasury shares and

%ay be disposed of by said

corporation in accordance with the

provisions of this Code. !8a-76a"

Section 68. When sale may be

questioned. –


28/48


or special %eeting duly called for the

purpose. !(6a"

Stoc) corporations are prohibited

fro% retaining surplus prots in

excess of one hundred !(##;"

percent of their paid-in capital stoc),

except* !(" when ustied by denitecorporate expansion proects or

progra%s approved by the board of

directors9 or !2" when the corporation

is prohibited under any loan

agree%ent with any nancial

institution or creditor, whether local

or foreign, fro% declaring dividends

without its:his consent, and such

consent has not yet been secured9 or

!" when it can be clearly shown thatsuch retention is necessary under

special circu%stances obtaining in

the corporation, such as when there

is need for special reserve for

probable contingencies. !n"

Section (#. Number and

qualifcations o incorporators. –

Any nu%ber of natural persons not

less than ve !4" but not %ore than

fteen !(4", all of legal age and a%aority of who% are residents of the

Philippines, %ay for% a private

corporation for any lawful purpose or

purposes. 5ach of the incorporators

of s stoc) corporation %ust own or be

a subscriber to at least one !(" share

of the capital stoc) of the corporation.

!6a"

Section 4#. 8egular and special

meetings o stocholders or

members. - Begular %eetings of

stoc)holders or %e%bers shall be

held annually on a date xed in the

by-laws, or if not so xed, on any date

in April of every year as deter%ined

by the board of directors or trustees*

Provided, $hat written notice of

regular %eetings shall be sent to all

stoc)holders or %e%bers of record at

least two !2" wee)s prior to the

%eeting, unless a di1erent period is

re&uired by the by-laws.

Special %eetings of stoc)holders or

%e%bers shall be held at any ti%e

dee%ed necessary or as provided inthe by-laws* Provided, however, $hat

at least one !(" wee) written notice

shall be sent to all stoc)holders or

%e%bers, unless otherwise provided

in the by-laws.


29/48



30/48


covered by the voting trust

agree%ent shall be cancelled and new

ones shall be issued in the na%e of

the trustee or trustees stating that

they are issued pursuant to said

agree%ent. 3n the boo)s of the

corporation, it shall be noted that the

transfer in the na%e of the trustee or

trustees is %ade pursuant to said

voting trust agree%ent.

$he trustee or trustees shall execute

and deliver to the transferors voting

trust certicates, which shall be

transferable in the sa%e %anner and

with the sa%e e1ect as certicates of

stoc).

$he voting trust agree%ent led with

the corporation shall be subect to

exa%ination by any stoc)holder of the

corporation in the sa%e %anner as

any other corporate boo) or record*

Provided, $hat both the transferor

and the trustee or trustees %ay

exercise the right of inspection of all

corporate boo)s and records in

accordance with the provisions of this

Code.

Any other stoc)holder %ay transfer

his shares to the sa%e trustee or

trustees upon the ter%s and

conditions stated in the voting trust

agree%ent, and thereupon shall be

bound by all the provisions of said

agree%ent.


31/48



directors, where authoried in the

articles of incorporation, %ay x the









and non-assessable and the holder of

such shares shall not be liable to the




issued for a consideration less thanthe value of ve !P4.##" pesos per






as dividends.



insuring co%pliance withconstitutional or legal re&uire%ents.





other share.



cases allowed by this Code, theholders of such shares shall

nevertheless be entitled to vote on

the following %atters*


incorporation9


laws9



substantially all of the corporate

property9




stoc)9



or other corporations9

/. 3nvest%ent of corporate funds in





i%%ediately preceding paragraph

the vote necessary to approve a




Section 7(. Power to ac&uire own

shares. – A stoc) corporation shall

have the power to purchase orac&uire its own shares for a

legiti%ate corporate purpose or

purposes, including but not li%ited to

the following cases* Provided, $hat

the corporation has unrestricted

retained earnings in its boo)s to

cover the shares to be purchased or

ac&uired*

(. $o eli%inate fractional shares

arising out of stoc) dividends9

2. $o collect or co%pro%ise an

indebtedness to the corporation,

arising out of unpaid subscription, in

a delin&uency sale, and to purchase

delin&uent shares sold during said

sale9 and

. $o pay dissenting or withdrawing

stoc)holders entitled to pay%ent for


32/48


their shares under the provisions of

this Code. !a"

Section 4/. 9oting right or

treasury shares. – $reasury shares

shall have no voting right as long as

such shares re%ain in the $reasury.

!n"

Section 6/. /ayment o balance o

subscription. – Subect to the



any stoc) corporation %ay at any ti%e

declare due and payable to the













shall render the entire balance dueand payable and shall %a)e the





date until full pay%ent. 3f within

thirty !#" days fro% the said date no



beco%e delin&uent and shall be

subect to sale as hereinafter



Section 6. Certifcate o stoc and

transer o shares. – $he capital

stoc) of stoc) corporations shall be

divided into shares for which

certicates signed by the president or

vice president, countersigned by the

secretary or assistant secretary, and

sealed with the seal of the

corporation shall be issued in

accordance with the by-laws. Shares

of stoc) so issued are personal

property and %ay be transferred by

delivery of the certicate or

certicates indorsed by the owner or

his attorney-in-fact or other person

legally authoried to %a)e the

transfer.


33/48


. 3n case of %erger or consolidation.

!n"

Section . 47ect o demand and

termination o right. – 0ro% the

ti%e of de%and for pay%ent of the

fair value of a stoc)holder>s shares

until either the abandon%ent of thecorporate action involved or the

purchase of the said shares by the

corporation, all rights accruing to

such shares, including voting and

dividend rights, shall be suspended in

accordance with the provisions of this

Code, except the right of such

stoc)holder to receive pay%ent of the

fair value thereof* Provided, $hat if

the dissenting stoc)holder is not paidthe value of his shares within # days

after the award, his voting and

dividend rights shall i%%ediately be

restored. !n"

Section /. /o&er to e#tend or

shorten corporate term. – A private

corporation %ay extend or shorten its

ter% as stated in the articles of

incorporation when approved by a

%aority vote of the board of directorsor trustees and ratied at a %eeting

by the stoc)holders representing at




in case of non-stoc) corporations.

=ritten notice of the proposed action

and of the ti%e and place of the

%eeting shall be addressed to each

stoc)holder or %e%ber at his place of residence as shown on the boo)s of




personally* Provided, $hat in case of

extension of corporate ter%, any



conditions provided in this code. !n"

Section 72. /o&er to in(est

corporate unds in another

corporation or business or or any

other purpose. – Subect to the

provisions of this Code, a private

corporation %ay invest its funds in

any other corporation or business or

for any purpose other than the

pri%ary purpose for which it was

organied when approved by a

%aority of the board of directors or

trustees and ratied by the

stoc)holders representing at least


capital stoc), or by at least two thirds

!2:" of the %e%bers in the case of

non-stoc) corporations, at a

stoc)holder>s or %e%ber>s %eeting

duly called for the purpose. =ritten

notice of the proposed invest%ent

and the ti%e and place of the %eeting

shall be addressed to each






personally* Provided, $hat anydissenting stoc)holder shall have

appraisal right as provided in this

Code* Provided, however, $hat where

the invest%ent by the corporation is

reasonably necessary to acco%plish

its pri%ary purpose as stated in the

articles of incorporation, the approval

of the stoc)holders or %e%bers shall

not be necessary. !(/ (:2a"

Section //. tocholder;s or

member;s appro(al. – ?pon

approval by %aority vote of each of

the board of directors or trustees of

the constituent corporations of the

plan of %erger or consolidation, the

sa%e shall be sub%itted for approval

by the stoc)holders or %e%bers of

each of such corporations at separate


34/48


corporate %eetings duly called for the

purpose.


35/48


Section 7. When right to payment

ceases. –


36/48




any stoc) corporation %ay at any ti%e

declare due and payable to the













shall render the entire balance dueand payable and shall %a)e the





date until full pay%ent. 3f within

thirty !#" days fro% the said date no



beco%e delin&uent and shall besubect to sale as hereinafter



Section /#. Court action to reco(er

unpaid subscription. –


37/48


was sold, with interest fro% the date

of sale at the legal rate9 and no such

action shall be %aintained unless it is

co%%enced by the ling of a

co%plaint within six !6" %onths fro%

the date of sale. !7/a"

Section /(. 47ect o delinquency. –s

%eeting, nor shall the holder thereof

be entitled to any of the rights of a

stoc)holder except the right to

dividends in accordance with the

provisions of this Code, until and

unless he pays the a%ount due on his

subscription with accrued interest,and the costs and expenses of

advertise%ent, if any. !4#a"

12. +oos

Section /7. +oos to be ept0 stoc

transer agent. – 5very corporation

shall )eep and carefully preserve at

its principal o1ice a record of all

business transactions and %inutes of

all %eetings of stoc)holders or%e%bers, or of the board of directors

or trustees, in which shall be set forth

in detail the ti%e and place of holding

the %eeting, how authoried, the

notice given, whether the %eeting

was regular or special, if special its

obect, those present and absent, and

every act done or ordered done at the

%eeting. ?pon the de%and of any

director, trustee, stoc)holder or

%e%ber, the ti%e when any director,

trustee, stoc)holder or %e%ber

entered or left the %eeting %ust be

noted in the %inutes9 and on a si%ilar

de%and, the yeas and nays %ust be

ta)en on any %otion or proposition,

and a record thereof carefully %ade.

$he protest of any director, trustee,

stoc)holder or %e%ber on any action

or proposed action %ust be recorded

in full on his de%and.

$he records of all business

transactions of the corporation and

the %inutes of any %eetings shall be

open to inspection by any director,

trustee, stoc)holder or %e%ber of thecorporation at reasonable hours on

business days and he %ay de%and, in

writing, for a copy of excerpts fro%

said records or %inutes, at his

expense.

Any o1icer or agent of the

corporation who shall refuse to allow

any director, trustees, stoc)holder or

%e%ber of the corporation to

exa%ine and copy excerpts fro% its

records or %inutes, in accordance

with the provisions of this Code, shall

be liable to such director, trustee,

stoc)holder or %e%ber for da%ages,

and in addition, shall be guilty of an

o1ense which shall be punishable

under Section (77 of this Code

Provided, $hat if such refusal is %ade

pursuant to a resolution or order of

the board of directors or trustees, theliability under this section for such

action shall be i%posed upon the

directors or trustees who voted for

such refusal* and Provided, further,

$hat it shall be a defense to any

action under this section that the

person de%anding to exa%ine and

copy excerpts fro% the corporation>s

records and %inutes has i%properly

used any infor%ation secured throughany prior exa%ination of the records

or %inutes of such corporation or of

any other corporation, or was not

acting in good faith or for a legiti%ate

purpose in %a)ing his de%and.

Stoc) corporations %ust also )eep a

boo) to be )nown as the Fstoc) and

transfer boo)F, in which %ust be )ept


38/48


a record of all stoc)s in the na%es of

the stoc)holders alphabetically

arranged9 the install%ents paid and

unpaid on all stoc) for which

subscription has been %ade, and the

date of pay%ent of any install%ent9 a

state%ent of every alienation, sale or

transfer of stoc) %ade, the date

thereof, and by and to who% %ade9

and such other entries as the by-laws

%ay prescribe. $he stoc) and transfer

boo) shall be )ept in the principal

o1ice of the corporation or in the

o1ice of its stoc) transfer agent and

shall be open for inspection by any

director or stoc)holder of the

corporation at reasonable hours on

business days.


39/48


designated in the plan of

consolidation9

2. $he separate existence of the

constituent corporations shall cease,

except that of the surviving or the

consolidated corporation9

. $he surviving or the consolidated

corporation shall possess all the

rights, privileges, i%%unities and

powers and shall be subect to all the

duties and liabilities of a corporation

organied under this Code9

7. $he surviving or the consolidated

corporation shall thereupon and

thereafter possess all the rights,

privileges, i%%unities and franchisesof each of the constituent

corporations9 and all property, real or

personal, and all receivables due on

whatever account, including

subscriptions to shares and other

choses in action, and all and every

other interest of, or belonging to, or

due to each constituent corporation,

shall be dee%ed transferred to and

vested in such surviving orconsolidated corporation without

further act or deed9 and

4. $he surviving or consolidated

corporation shall be responsible and

liable for all the liabilities and

obligations of each of the constituent

corporations in the sa%e %anner as if

such surviving or consolidated

corporation had itself incurred such

liabilities or obligations9 and anypending clai%, action or proceeding

brought by or against any of such

constituent corporations %ay be

prosecuted by or against the

surviving or consolidated corporation.

$he rights of creditors or liens upon

the property of any of such

constituent corporations shall not be

i%paired by such %erger or

consolidation. !n"

1!. Nonuse o Corporate

Charter

Section 22. 47ects on nonuse o

corporate charter and continuousinoperation o a corporation. – 3f a

corporation does not for%ally

organie and co%%ence the

transaction of its business or the

construction of its wor)s within two

!2" years fro% the date of its

incorporation, its corporate powers

cease and the corporation shall be

dee%ed dissolved. Gowever, if a

corporation has co%%enced the

transaction of its business but

subse&uently beco%es continuously

inoperative for a period of at least

ve !4" years, the sa%e shall be a

ground for the suspension or

revocation of its corporate franchise

or certicate of incorporation. !(8a"

$his provision shall not apply if the

failure to organie, co%%ence the

transaction of its businesses or theconstruction of its wor)s, or to

continuously operate is due to causes

beyond the control of the corporation

as %ay be deter%ined by the


1*. Dissolution

Section ((. 9oluntary dissolution

&here no creditors are a7ected. –

3f dissolution of a corporation doesnot preudice the rights of any

creditor having a clai% against it, the

dissolution %ay be e1ected by

%aority vote of the board of directors

or trustees, and by a resolution duly

adopted by the a1ir%ative vote of the

stoc)holders owning at least two


stoc) or of at least two-thirds !2:" of


40/48


the %e%bers of a %eeting to be held

upon call of the directors or trustees

after publication of the notice of ti%e,

place and obect of the %eeting for

three !" consecutive wee)s in a

newspaper published in the place

where the principal o1ice of said

corporation is located9 and if no

newspaper is published in such place,

then in a newspaper of general

circulation in the Philippines, after

sending such notice to each

stoc)holder or %e%ber either by

registered %ail or by personal

delivery at least thirty !#" days prior

to said %eeting. A copy of the

resolution authoriing the dissolution

shall be certied by a %aority of theboard of directors or trustees and

countersigned by the secretary of the

corporation. $he Securities and

5xchange Co%%ission shall

thereupon issue the certicate of

Documents

Reviewer Comm